Antitrust

In a nutshell

Antitrust attorneys advise clients on whether their business practices comply with competition and trade regulations domestically and abroad. In doing so, they undertake a broad range of different legal activities, including litigation, government investigations, merger advice and counseling.

Within litigation, generally there are cases alleging improper single company conduct and those alleging anticompetitive agreements or collusion among two or more entities. The former refers to claims against a single entity for monopolistic conduct, such as predatory pricing or abuse of monopoly power. The latter refers to an agreement or conspiracy among two or more entities that could include conduct such as boycotting, bid-rigging, price-fixing, and dividing markets or customers. Many of these cases are brought by a class of affected customers or consumers. Both types are private and civil.

Government investigation, or enforcement, can be brought as a civil or criminal proceeding. Civil enforcement involves investigating companies for certain conduct, asking them to change their behavior, and sometimes fining them. Criminal investigations revolve primarily around cartels and price-fixing, and carry steep criminal penalties.

Merger advice (often called merger control) is another big piece of antitrust work, whereby attorneys shepherd their client through major regulations associated with M&A transactions, which generally result in a greater market share, the likely elimination of competitors and a greater risk of monopolistic conduct. Counseling involves providing clients with advice about their current and future business practices, such as co-marketing or distribution.

What antitrust lawyers do

File for motion to dismiss. This can often go through several rounds, as the claimant amends the complaint.

If a class action, attorneys conduct 'class' discovery, during which they work with experts to attempt defeating class action certification. They will depose the experts and file and defend their reports.

If class certification is granted, or if the case was never a class action to begin with, lawyers conduct 'merits' discovery. This requires producing all the relevant documents and conducting depositions about liability and damages.

Apply for summary judgment.

If denied summary judgment, attorneys prepare for trial, which involves determining what evidence and depositions to use and whether they will be admitted, drawing up the exhibit list, and deciding what sort of discovery or motions to push for.

Receive Civil Investigative Demand (CID) from the Federal Trade Commission or Department of Justice, requesting documents. State attorneys general can also initiate investigations.

Negotiate with the government to narrow the categories of violations, limit the bounds of discovery and win more time.

Produce the requested documents, ensuring those provided comply with the government’s demand. Jay Srinivasan of Gibson Dunn describes this portion as capable of being a “massive implementation effort” in larger cases.

Negotiate and maybe give interviews to the government while waiting for its decision.

Depending on the three possible outcomes, attorneys close the investigation, negotiate, or defend the client in court or before an administrative law judge.

Criminal governmental investigation

Receive grand jury subpoena or FBI warrant.

Conduct investigation into possible wrongdoing.

Produce materials requested by the subpoena or warrant.

If evidence suggests possible wrongdoing, counsel client on strategies to defend against a possible charge or advise on possible plea arrangements.

Client decides whether to fight or plea. If the latter, negotiate plea agreement (including scope of charge and fine amount).

Enter into a plea agreement.

If negotiations fail and the client does not enter into plea, or chooses to fight the charge, attorneys will go to trial.

Mergers

If the merger meets one or more of the government’s enumerated thresholds, attorneys file a Hart-Scott-Rodino form (HSR), indicating the intent to merge.

Conduct due diligence and spot issues.

Determine the likelihood that the merger will be challenged, reviewed or investigated.

Depending on the government’s response to the HSR, lawyers wait, go ahead with the merger, agree to a consent decree, or defend the client in an injunctive trial or administrative hearing.

Realities of the job

Antitrust is an intellectually rigorous discipline that’s heavily infused with math and economics. Attorneys must know how markets work, how they are defined, and how different types of conduct will affect them. You need not have studied economics as an undergraduate, though it helps enormously. Even if you did, it takes many years to develop any kind of expertise.

The Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914 are the body of law most antitrust attorneys work with and which forms the foundation for most state antitrust laws. Legal precedent plays the largest role in antitrust matters. Lawyers must know their case law, especially US Supreme Court decisions, and the issues that have and have not been resolved.

Even the smallest antitrust case can take two to three years to make its way through litigation. If it’s only a two-party case of smaller companies, it could still take two years or more.

Because the cases tend to be large and high-profile, young associates often have to share responsibility among a larger team. If the case is big enough, however, associates may get an opportunity to second-chair depositions.

Discovery is a crucial part of the litigation process and is document and time-intensive. Associates will play a key role in document review and become integral members of the team, because nobody is more valuable to litigation than those who know the documents well.

The stakes in criminal cases are higher than in civil ones, since there is more potential for individual exposure. Public companies will tend to plead if there is a substantial basis for criminal charges, since trial will carry significant risk and uncertainty.

There will almost always be simultaneously ongoing civil litigation when a company is under civil or criminal government investigation.

The DOJ, the only agency that handles criminal matters, has historically lost more than half its cases. Juries are very particular in applying an exacting burden of proof on the government. Recent Supreme Court decisions have also been favorable to antitrust defendants.

Whereas the antitrust section of the DOJ is a small part of a large department, the FTC is an independent regulatory agency and handles some matters the DOJ doesn’t, such as unfair competition and advertising. Attorneys will have different experiences with people at both the DOJ and FTC, based on the different rules and procedures of each, as well as on personalities.

Generally speaking, antitrust work on mergers will increase when the economy is good, while a downturn will bring more litigation work.

Antitrust will also be affected by intellectual cycles and en vogue economic theories. Daniel Swanson of Gibson Dunn says: “We’re currently in an upswing of thought calling for greater activism, internationalization, and coordination in jurisdictions.”

Steven Newborn at Weil, Gotshal & Manges says: “One of the advantages of working on mergers is that they have a beginning, a middle and an end and they normally last only a few months. I find it very attractive to be able to have a decision within a relatively short period of time.”

Current issues

The antitrust landscape, though dependent on the economy and the business community, also varies from administration to administration. When he came into office, President Obama promised to take a tougher line on antitrust violations. Janet McDavid of Hogan Lovells says: “Major and minor antitrust cases are now pending. The Obama administration has been more aggressive. In particular, the FTC and Justice Department have increased their willingness to litigate.”

There was an increase in minor cases in 2011. The DOJ's Antitrust Division filed 90 cases in 2011 – a rise of 50% on 2010, and the highest figure in almost 25 years. This added up to more than $1 billion in criminal fines and other payments.

Government agencies are utilizing some provisions of antitrust law that haven’t been used in the recent past; their approach is trickling down into civil suits. According to the DOJ, pre-merger notifications under the Hart-Scott-Rodino Act increased by over 24% in 2011.

Many antitrust cases have become more complex as courts move away from considering 'per se' violations toward the 'rule of reason', which asks whether the anticompetitive effects of the conduct in question outweigh the procompetitive effects. Defendants may find summary judgment harder to win, but plaintiffs may have a harder time proving their case at trial, possibly rendering them more reluctant to lodge complaints.

The 2007 decision in Bell Atlantic v Twombly requires plaintiffs to make much more definitive allegations in a complaint in order for a case to move forward, which some believe has increased the number of antitrust cases dismissed in the early stages. Steven Newborn says: “The Supreme Court's decision in Twombly acts as a filter. It cuts off a lot of litigation at an early stage. The cases that do survive are more likely to go the distance.”

Newborn adds: “In the merger world things are happening all the time. Whether it is a new administration, new personnel at government agencies who are pursuing new initiatives, new Supreme Court decisions or even new economic theories forcing us to think a little differently, it is an exciting area."

Jeffrey Cashdan at King & Spalding says: “We are seeing more and more international jurisdictions adopting and enforcing competition laws. For US lawyers, that means dealing with the coordination of various competition laws, such as law in the EU, in EU member states, or some other jurisdiction, and understanding how they impact issues arising in the US.”

Advice from the antitrust gurus

"Antitrust requires a great deal of judgment. The very same facts can be both helpful and harmful to your case. The trick is to balance the risk/reward of those facts and make your most persuasive case. In addition, the beauty of merger work is that every few months we get to learn a completely new industry. A real understanding of the industry and its competitive dynamic is crucial to maximize your chances of getting your deal through."

"A holistic approach to getting a deal through is important. Increasingly, merger deals are multinational, so there has to be coordination between lawyers internationally. For younger associates this creates an interesting environment with more travel and the need for better understanding of other jurisdictions."

"The beauty of handling mergers is that they are really a positive to companies, rather than litigation which is often defensive, so you deal with a company's top people – the General Counsel, the CFO, the CEO – all at Fortune 100 companies. It is always fun to deal with very smart people."

Jeffrey Cashdan, partner, King & Spalding

"It's not a prerequisite, but having an experience of economics is helpful. A successful antitrust lawyer needs not only technical legal expertise but a real curiosity about businesses. Antitrust law is difficult and rigorous, so a strong work ethic is essential as well as great attention to detail. You have to roll up your sleeves and work hard at the craft. It takes many years to become an expert."

“To defend or give advice to clients, we need to understand their business very thoroughly – and that is just worlds of fun. So we undergo a crash course in whatever that area happens to be. It might be canned tuna fish or tanks or house paint. It keeps me engaged and it's what associates tell me they love about the practice.” - Janet McDavid, partner, Hogan Lovells